Elf, ENI sign 540 million dollar oil deal with Iran
TEHRAN, Mar 1 (AFP) - Petroleum giants Elf Aquitaine of France and
Italy's ENI signed a 540 million dollar contract Monday to develop an Iranian
oil field despite the threat of US sanctions over heavy investment in Iran's
oil sector.
The firms signed the nine-year contract with Deputy Oil Minister Mehdi
Hosseini to increase production at the offshore Dorud field in the northern
Gulf, Iran's oldest operational oil field.
The deal, a so-called "buy-back" scheme in which the firms'
investment will be repaid with a share of production, is intended to boost
output at Dorud from 148,000 to 220,000 barrels per day within the next
four years. Elf and ENI are 55-45 partners in the contract, which was
given the go-ahead last month by Iran's Supreme Economic Council, the
nation's top economic body headed by President Mohammad Khatami.
The deal is well above the threshold set by the so-called D'Amato law,
US legislation that threatens stiff sanctions against firms investing more
than 20 million dollars in the oil sectors of Iran or Libya.
Washington, which accuses Iran of sponsoring global terrorism, imposed
a unilateral economic embargo on Tehran in 1995 and passed the Iran-Libya
Sanctions Act -- sponsored by then US Senator Alfonse D'Amato -- the following
year.
French energy group Total, in partnership with Russia's Gazprom and
Petronas of Malaysia, was the first to flaunt the legislation by signing
a two billion dollar deal in 1997 to develop Iran's giant South Pars field
in Gulf waters.
Washington finally granted the project an exemption in the face of
intense international pressure, and a number of oil companies interpreted
the US climbdown as a sign that the United States had neither the will
nor support to enforce such sanctions.
Last month Iran announced a deal worth 200 million dollars had been
agreed in principle with the Canadian firm Bow Valley and Britain's Premier
Oil to develop the offshore Balal site.
US State Department spokesman James Foley said at the time that Washington
"will certainly apply the law" if that deal goes through.
Iran embarked on a programme three years ago to open its nationalized
energy sector after foreign firms were banned from the industry following
the 1979 Islamic revolution.
Khatami has called for greater efforts to modernize Iran's oil industry,
which had fallen behind that of other nations due to the absence of foreign
investment.
Last year it put some 30 oil and gas projects in the Gulf and Caspian
Sea regions up for international tender on a buy-back basis.
The second largest oil producer in OPEC behind Saudi Arabia, Iran depends
on oil for more than 80 percent of its hard currency revenues and has been
hard hit by the worldwide slump in crude prices.
The steep decline in revenues has left Iran with a budget shortfall
of some five billion dollars and in January the government approved a 75
percent hike in the price of petrol.
But government subsidies still make Iranian petrol among the cheapest
in the world, with the hike boosting prices from 200 rials (six cents)
to 350 rials (11 cents) per litre for the coming Iranian year, which begins
in March.
Iranian consumers pay a fraction of the cost, estimated here to be
about 900 rials (30 cents) a litre, necessitating an annual import of some
300 million dollars of oil to satisfy domestic consumption.
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